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Banking industry

Bank of New York Offers $23.6-Billion to Acquire Mellon Bank

Strategic Insights

— 2 min read

Bank of New York Co. has made a major move in the banking industry by offering to acquire Mellon Bank Corp. for $23.6 billion in stock, marking the largest unsolicited bank takeover bid in history. The proposal, valued at $90 a share, represents a 28.8% premium over Mellon's closing price on Tuesday. While Mellon's chairman, Frank Cahouet, insists that the company is not for sale, investors seem convinced that the deal will go through, with Mellon shares rising $8.12 to $78.

Key Takeaways:

  • Bank of New York's offer is the largest unsolicited bank takeover bid in history, valued at $23.6 billion in stock.
  • The proposed deal would create a bank with over $104 billion in assets, making it the eighth-largest U.S. bank.
  • Combining the companies would result in a bank with $5.5 trillion in assets under custody and $350 billion in assets under management.
  • The takeover would also enable cost savings of $420 million and additional revenue of $60 million, starting from 2000.
  • However, Bank of New York would take a $495 million charge next year, reducing earnings by about 3% to pay for job cuts and restructuring.
  • The acquisition would be the sixth-largest combination of financial services companies and the ninth-largest merger to date.
  • Despite the offer, Mellon's management and shareholders are not yet convinced, with Chairman Frank Cahouet stating that the company is not for sale.
  • The purchase would be subject to Pennsylvania's tough anti-takeover laws, and Mellon has a poison pill in place to protect itself from unwanted takeover attempts.

Statistics:

  • $23.6 billion: The value of Bank of New York's proposed acquisition of Mellon Bank Corp.
  • 28.8% premium: The premium offered by Bank of New York above Mellon's closing price on Tuesday.
  • $104 billion: The combined assets of Bank of New York and Mellon Bank Corp. after the proposed takeover.
  • $5.5 trillion: The assets under custody of the combined company.
  • $350 billion: The assets under management of the combined company.
  • 44,000 employees: The number of employees at the combined company.
  • 6,000-7,000 jobs: The number of jobs that will be cut as a result of the proposed merger.
  • $420 million: The expected cost savings from the proposed merger.
  • $60 million: The expected additional revenue from the proposed merger.
  • 3% reduction: The anticipated reduction in earnings for Bank of New York as a result of the proposed merger.
  • $495 million: The charge Bank of New York will take next year to pay for job cuts and restructuring.

Sources:

  • Bloomberg News
  • Dow Jones Bank of New York Co.
  • Lehman Brothers Inc.
  • Simpson Thacher & Bartlett
  • Travelers Group Inc.
  • Citicorp
  • NationsBank Corp.
  • BankAmerica Corp.
  • Banc One Corp.
  • First Chicago NBD Corp.

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